We’re currently seeing the evolution of Korean beauty in the US. The short history is that there were a smattering of distributors that mostly distributed to Korean specialty stores. When the K-Beauty wave started to become something in 2012, e-commerce retailers showed up promising to be either an e-commerce platform or a hybrid retailer + distributor. Now, in 2016, we’re seeing the movement to private label products as Memebox has leveraged its online retail platform to launch and grow their own private label brands. Peach & Lily has also launched their own line of branded products and Soko Glam has done this via brand partnerships with Manefit and Neogen.

The Move to Private label

This evolution is really interesting and I think it goes to show that e-commerce is tough. The barriers to entry are low – anyone and their mother can get access to product, put up a Shopify site, and be a retailer. Competition is high, differentiation is low, consumer demand is still small and niche, and it’s hard to create something really own-able at scale with online retail in the K-Beauty space.

We’re seeing players move to private label products because, if done well, is something where margins are higher and barriers are greater since it takes a lot of money to meet minimum order requirements not to mention create a strong brand and line of products. Building a brand story, having specially formulated products, building allegiance to these products are all important elements of stickiness.

I had written before that K-Beauty’s advantage is really in their innovation speed and this move to private label products aligns well with macro beauty industry trends which are moving towards fast beauty.

What is fast beauty?

Similar to the fashion industry, the brands and retailers that have succeeded are the ones that have fast and nimble supply chains that get a pulse on the trends and bring them to stores at low cost at lightening speed. Zara, H&M, and others are winning. Ralph Lauren, J.Crew, and department stores like Macy's are not.

Similarly, in the beauty world, the move to fast beauty has rewarded brands like e.l.f. and NYX as mentioned in this L2 video. Their speed to market, innovation pipeline, and supply chain enable them to react faster making them hot prospects in the acquisition market.

K-Beauty Is Fast Beauty

Memebox, the Korean beauty e-commerce platform, is really the best company in the K-Beauty space poised to be a fast beauty company in a meaningful way especially given their recent $60MM round of funding. Their private label brands, Bon Vivant, Nooni, Pony Effect, and I'm Meme have been growing 60% on a quarterly basis and I expect to see these brands in every major beauty related retailer starting in 2017. Their ability to leverage purchase data to create products based on data that consumers want in months versus a L’Oreal which would take over 2 years is really amazing. This is true fast beauty.

It’s not unsurprising that the dynamics in fashion and the move towards fast fashion are creeping over into beauty. If K-Beauty is to have lasting power, it’s not because it’s Korean but because the innovation and product development addresses consumer’s ever changing tastes and needs in a dynamic way.